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The USMCA and the Mexican Automotive Industry
Preferential treatment for U.S.-made vehicles, Mexico's transformation into export base
2022/04/01
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Summary
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USMCA: U.S. and Mexico/Canada feud for full implementation in 2023
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Mexican market: Production vehicles will be more focused on U.S. exports, while domestic sales will depend on low-priced imports.
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Mexico domestic Sales trend: Recovery for the first time in 4 years, but sales remain low
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Automaker activities
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GM: Production for the U.S., further shifting domestic sales to vehicles imported from China
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VW: Strengthens its SUV lineup for the U.S. market with the start of production of the “Taos”
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Toyota: Production in Mexico consolidated into Tacoma for the North American market
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Stellantis: Started selling re-badged models from China joint venture
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Hyundai/Kia: steadily increasing market share in domestic sales, closing in on the top three
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Ford: Switching production models to popular light trucks and strengthening production system
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Honda: Domestic production consolidated into HR-V
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Mazda: Main axis of production will shift from passenger cars to CX-30 SUVs
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Production Forecast by LMC Automotive: Mexican production volume will reach a record high in 2023 and achieve 4.35 mn units in 2025
Summary
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| GM's Silao Plant in Mexico New union chosen under USMCA rules (Source: General Motors de México) |
The USMCA (United States-Mexico-Canada Agreement) replaced NAFTA (North America Free Trade Agreement: enacted in 1992) as the trilateral trade agreement among the three North American countries, coming into effect in July 2020.
Full implementation of the tariff-free requirements for automobile imports, which are stricter than those of NAFTA, will be delayed until 2023, but there have been conflicts between the U.S. and Canada/Mexico over the interpretation of the standards for calculating the intra-regional procurement rate and preferential treatment of U.S. vehicles, such as subsidies for U.S.-made EVs. Future discussions and agreements may affect automakers' investments and vehicle strategies.
Meanwhile, investment in Mexico has been strong, with automotive OEMs and parts suppliers increasing production and capital investment in their Mexican plants, making further progress even amid uncertainty over the future of the USMCA debate. OEMs have clearly positioned Mexico as an export hub, a trend that is further reinforced by the fact that many U.S.-based automakers, Toyota, and other manufacturers export the majority of their production models to the U.S. and Canada. Plans for the refresh of production models and investment to increase production have continued to be announced in response to demand trends in the U.S., such as the shift from passenger cars to light trucks and the prospect of the spread of EVs in the future.
This report covers the key developments surrounding the USMCA a year and a half after its implementation, as well as the latest developments in the Mexican automotive industry. In addition, the Mexican production forecast by LMC Automotive is also reported.
Related Reports:
U.S. battery electric vehicle strategies for GM, Ford and Stellantis (Dec. 2021)
Motor Bella 2021: OEMs expand EV model lineup in response to market demand (Nov. 2021)
Motor Bella 2021: U.S. demand for SUVs and light trucks steadily grows (Oct. 2021)
Japanese suppliers in Mexico: Response to increasing orders for EV materials, etc. (Jul. 2021)
Foreign investments of Chinese automakers : SAIC Motor and Great Wall Motor (Jun. 2021)
Start of USMCA and Mexican automobile industry trends (Jul. 2020)
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